EDITOR'S CHOICE -- SCOTT SUTTELL

Study claims auto insurers make unfair use of education levels, occupations to set rates

Blog Entry: July 23, 2013 1:58 PM | Author: SCOTT SUTTELL

Reuters reports that several large U.S. auto insurance companies — including Mayfield Village-based Progressive Corp. — “use education levels and occupation to set rates, effectively pricing some low- and moderate-income earners out of the market,” according to a report by the Consumer Federation of America.

The report looks at premiums set by the 10 largest auto insurance companies in 10 urban areas across the United States. Reuters says the consumer group “plugged information about a fictional person into each company's website to get a quote, changing only education level and occupation to see the effect on rates.” (Five of the insurance companies were found to collect such information.)

In some cases, Reuters reports, “premiums for minimum-liability coverage exceeded $2000 and in one instance, in Baltimore, it was more than $4000, from Travelers Insurance.”

The report found that Geico, part of the Berkshire Hathaway group of companies, “charges more in six of the analyzed markets for a factory worker with a high school diploma than for a factory supervisor with a college degree,” according to the story.

Progressive Corp., which had the second-highest difference in premiums, was found to charge the factory worker 33% more in Baltimore and 8% more in Oakland, Calif., the news service says.

“Since education and occupation have been found to correlate with race, the CFA said the practice of using such factors is discriminatory,” according to Reuters.

But Robert Hartwig, an economist and president of the Insurance Information Institute, an industry group representing insurance companies, tells the news service that many factors go into determining insurance rates, each correlating with risk.

"Why would an insurer collect data that is not useful?" Mr. Hartwig asked. "These factors are used for one reason and one reason only, and that's to ascertain risk."

With this kind of regulation ...

“First-half revenue at the six biggest U.S. banks climbed for the first time in four years, fueling profits and vindicating Bank of America Corp. and Morgan Stanley leaders who presided over stock slumps,” Bloomberg reports.

Revenue through June climbed to $215 billion from $208 billion a year earlier, excluding some accounting charges, according to data compiled by Bloomberg.

The six banks reported $43.3 billion in total first-half profit, the most since 2007, according to the story.

Bloomberg notes that the bank profits “are again attracting scrutiny from lawmakers,” as U.S. senators quizzed Federal Chairman Ben S. Bernanke last week on whether regulators were being tough enough on the biggest banks and whether they were earning too much from trading.

“It's no surprise that mega-banks are doing quite well,” said Sen. Brown, who has introduced legislation with Senator David Vitter, a Louisiana Republican, to increase capital requirements for the top banks. “Yet they continue to claim that regulations — new regulations, impending regulations — are killing them.”

Not amusing, but rare

Two amusement park accidents on Friday — one in Texas that left a woman dead, the other at Cedar Point in Sandusky that injured seven — might reasonably give thrill-seekers pause, but USA Todaynotes the incidents are quite rare.

The paper says there were an estimated 1,415 injuries on amusement park rides in 2011, according to a report prepared by the National Safety Council Research and Statistical Services Group for the International Association of Amusement Parks and Attractions.

That's not insignificant, but the report notes that park visitors took 1.7 billion rides that year.

Be aware that the data are for fixed amusement park rides, not traveling carnival rides, which are considerably more likely to be the source of passenger injuries.

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